The History of DVD (Part 2)

[Note: This story was written in 2007 and contains contemporary information and speculation that may no longer be accurate.]

In Part 1 of this History of DVD, we recounted the behind-the-scenes efforts of Philips and Toshiba to develop a next-generation digital video disc format in the early 1990s. Toshiba had tried to work with Philips, but the Dutch giant decided instead to team with its CD-development partner, Sony. Philips and Sony then developed a DVD format it eventually dubbed multimedia CD (MMCD).

In 1992, Toshiba, led by Koji Hase, formed an alliance with Warner Brothers and its DVD evangelist Warren Lieberfarb, along with Matsushita. The trio developed a format it called Super Density (SD) and lined up Hollywood studio support via a group called the Hollywood Digital Video Disc Advisory Committee.

Since Lieberfarb was collecting Hollywood support, Philips sought out IBM to gain the PC industry’s endorsement. However, IBM’s optical disc expert, Dr. Allen Bell, found little in the Philips proposal to get excited about.

Sensing it was about to be overcome by the Toshiba/Warner partnership, Sony and Philips went public. On December 16, 1994, the two companies issued a joint press release announcing MMCD. Philips and Sony had hoped the announcement would give them leverage with the studios. Instead, the release forced the two camps into a public heavyweight fight, with Bell as referee.

Shake Hands and Come Out Fighting

To bolster its best-format claim, the Dec. 16 Philips/Sony release noted that “a voluntary group of experts from major computer hardware and software companies — IBM, Apple, Compaq and Microsoft — are discussing extensions of the volume and file standard…”

That was semantically correct, but implied a certain imprimatur by a group that had only met twice. Even worse, Bell and his group didn’t even know that they had been looking at a consumer video product, much less endorsing one.

Oops.

The newly formed SD Alliance, consisting of Toshiba, Hitachi, Matsushita, Mitsubishi, JVC, Pioneer and Thomson, couldn’t very well concede the field to Sony and Philips. On January 24, 1995, the SD Alliance counter-punched with its own “no, we have the format” release. The announcement billboarded the actual support of Time Warner, MGM, MCA (Universal) and Turner Home Entertainment, and touted how the SD format “meets or exceeds all requirements…[of] the Hollywood Digital Video Disc Advisory Committee.”

Now that Philips had shined the light on them, Bell and his ad hoc computer group suddenly gained a new level of importance. Instead of simply advising on computer compatibility for a new optical storage format, it would play kingmaker for the next big home entertainment movie format. On February 10, the group met at the San Francisco Airport Westin and formalized itself under the generic name of the Technical Working Group (TWG), with Bell as chairman. Much to the stunned dismay of the attending Sony/Philips executives, the TWG decided it wanted a demonstration of SD before it made any recommendations.

The TWG clearly stated that it would endorse neither DVD format. It would merely examine the technical details of the two proposed formats and develop a list of non-binding recommendations for computer-based applications.

That was the public pose, anyway. The cold, business reality was something else.

Sony, Philips, Toshiba, Matsushita and Warner may have been tough guys in their respective neighborhoods, but IBM was, well, if you weren’t “IBM-compatible,” you weren’t in the computer business. And all the DVD contestants either were or wanted to be in the computer business. The unstated fact was that both the SD and MMCD camps would be forced to abide with whatever IBM and the TWG “recommended.”

And what IBM and the TWG wanted was a single, unified DVD format. Fortunately for all concerned, Bell would be the final arbiter.

“What I value most is that he’s fair, he’s very fair,” Hase stated. “He did not side with Toshiba, he did not side with Disney or Sony for that matter. He tried to be as fair as possible.”

On February 28, Bell and the TWG met Warren Lieberfarb, Hase, Taizo Nishimura, soon to be president of Toshiba, Warner’s chief technical executive Chris Cookson, and representatives from the other SD Alliance companies, at the Warner studios in Burbank. Cookson demonstrated SD with the bus crash scene from The Fugitive in full-blown surround sound. Bell and his TWG compadres were suitably blown away. Bell and the TWG had, of course, already seen MMCD. After several technical sessions, it was clear to Bell and the TWG that SD was the superior format.

On May 3, the TWG, by this time joined by Hewlett-Packard, issued a press release entitled “Requirements for Future High Capacity Compact-Disc Format Announced by Computer Industry Technical Experts.” In the release, the TWG listed nine “objectives” that the PC companies expected from a new optical disc format. Many of these “objectives” dealt with backward and forward compatibility with both current and future entertainment and PC-based optical disc products.

While TWG’s objectives seemed fairly obvious, the press release put additional pressure on both the SD and MMCD camps to come to an accommodation.

“The press began to ask each camp, ‘What do you think of the computer industry requirements and their demand for a single format,'” Bell recalled. “It put them on the spot.”

Neither the SD nor MMCD specifications included PC data storage compatibility, even thought that was why Philips had originally approached IBM. The solution came from the Optical Storage Trade Association (OSTA), via the TWG. OSTA had issued a file system specification called the Universal Disc Format (UDF), which specified how data files are arranged on a disc. OSTA contributed a modified UDF called Micro UDF, which would enable a disc designed to be played in a consumer electronics DVD player to also be able to be played in a PC.

The unification battle once again moved behind closed doors, but both sides continued to dug in. By late July, disgusted by the lack of compromise, Bell privately let everyone know that IBM was ready to endorse SD.

This threat prompted new high-level discussions between the camps. In August, Nishimuro made several covert visits to the nearby Sony offices in Tokyo. Faced with IBM’s threat, Sony finally agreed to compromise, but wanted one concession in order to save face. Sony asked that its EFM+ modulation scheme be used. Bell agreed.

With the outlines of a compromise in place, the MMCD camp diplomatically surrendered. On August 18, 1995, the TWG received a letter signed by Philips’s Key Modules Division Director Jan Oosterveld and Sony’s MMCD project leader, Teruaki Aoki. The two companies were prepared to support the goal of a unified proposal by combining the best approaches of each.

On August 24, at a press conference at the IFA show in Berlin, Sony and Philips made their concession public.

Not So Fast

At first, the SD Alliance was cool to the idea of the Sony/Philips compromise. After all, SD seemed as if it would be the winning format and was hesitant about backing down on the modulation question.

Bell and the TWG decided it was time for a final showdown. The annual OSTA meeting was scheduled for September 7-8 in Maui, Hawaii. Using the OSTA meetings as cover, the TWG met for six hours with each camp at the Sheraton in Waikiki. On the 7th, the SD camp tried to convince Bell and the TWG that its modulation scheme was better, and that the EFM+ modulation scheme would mean the loss of more than a quarter of a gigabyte in capacity. On the 8th, the MMCD camp argued that the SD modulation scheme was too experimental.

After its MMCD meeting, Bell and his TWG cohorts conferred over dinner. Around midnight, Bell and fellow IBM executive Vic Jipson wrote out a one-page technical report in longhand, which they faxed back to IBM executive Pat Toole at IBM headquarters in Armonk, NY. At 3am Hawaii time (9am eastern time), the two called Toole to discuss the report. Since no one in the PC industry cared about the extra quarter of a gig, Bell recommended accepting the Sony/Philips compromise. After consulting with Lieberfarb, Bell, Jipson and Toole sent a letter to Sony, Matsushita, Philips and Toshiba, informing all concerned that IBM would endorse the compromise format, and was “looking forward to a strong public announcement.”

The relieved MMCD camp quickly responded in the affirmative. The SD Alliance members, however, still weren’t so keen about the compromise. After faxing Bell that he was working on the SD Alliance’s response, Nishimura gathered together the seven members of the SD Alliance. Five voted yes, two voted against. Nishimura, however, wanted unanimity. After eight hours, Nishimura got his unanimous vote.

The SD Alliance’s made the decision public on September 15. But the press release petulantly complained that “partial modification of the SD format, which was designed on a consistent concept, is expected to bring about a number of new difficulties.” None that couldn’t be solved, however. The SD and MMCD engineers conferred, and the final compromise specifications were announced on November 13 at Comdex.

Not Ready For Prime Time

But there were still three problems. The first was what to call the unified format. In its September 15 statement, the SD Alliance proposed that the SD name be retained. Fat chance, although the name lived on in Toshiba’s DVD alphanumeric DVD model number nomenclature. As co-developers of the compact disc, the core technology at the heart of DVD, Sony and Philips wanted “CD” as part of the format name. Fatter chance. Bell’s recommended SMCD (Super Multimedia CD), but neither Toshiba nor Matsushita wanted “CD” in the name.

The answer, of course, had been staring everyone in the face. Lieberfarb had been calling the new format DVD – digital video disc – for more than a year, and the press had followed suit. But that didn’t suit the newly-formed DVD Forum or Toshiba in particular. Digital VIDEO disc implied that the format was for entertainment purposes only. There was nothing in the name that implied the format’s far more expansive computer capabilities.

“Mr. Nishimura was determined to unite the systems, otherwise there’d be no industry,” Hase remembered. “He picked up a dictionary from his drawer in his office and flipped through the pages to the letter ‘V’ and he stopped his finger and asked me, ‘What does “versatile” mean?’ I said, ‘multi-purpose.’ And Mr. Nishimura said, ‘Fine, then let’s call this digital versatile disc instead of digital video disc.'”

On December 8, 1995, the final unified digital versatile disc specifications were released, and Toshiba announced that the first players would go on sale the following September for between $500 and $700.

Well, not really. There was one last hurdle to overcome: pirates.

Against all odds, the monumental job of getting the cats and dogs of the consumer electronics and computer world to sleep together had been successful. But the Hollywood studios had no desire to face the kind of piracy rampant in the videotape world, especially since DVD would provide video pirates with a perfect original from which to make their black market copies.

Lieberfarb and the Motion Picture Association of America (MPAA, the ratings people), along with the Consumer Electronics Manufacturers Association (CEMA) wanted DVDs to be absolutely, positively copy-proof. The normally natural enemies of hardware and Hollywood ganged up on Congress to pass federal legislation making it illegal to copy DVDs. But the MPAA-CEMA legislation would have made it impossible for computer users to manipulate DVD content. The Information Technology Industry (ITI), representing the computer industry, made it clear that “there’s a lot more out there than just movies,” and vehemently opposed any legislation.

Once again, the DVD world rang for Bell. After all, the TWG had clout enough to force Sony, Philips, Toshiba and Matsushita to agree to one format. Surely it could use its clout to find and endorse a copy protection scheme.

In May 1996, Bell helped organize the copy protection technical working group (CPTWG). The CPTWG consisted of representatives from Hollywood, the consumer electronics industry, the PC/IT industry (represented by Bell), and the record industry. On October 29, 1996, after studying several proposals, the group endorsed a scheme from Matsushita called the Content Scrambling System (CSS)

Instead of scrambling the whole movie, CSS simply scrambles the beginning of each scene, which lowers the cost of encoding and decryption circuitry. The world was then divided into six “regions,” with different encryption codes for each region, designed to limit if not eliminate the black market trade.

Now DVD was a done deal. Once the copy protection scheme was finalized, it didn’t take long for hardware to hit the streets. In Japan, Toshiba released the world’s first DVD deck, the SD-3000, in November 1996. In the U.S., Pioneer, Toshiba and Sony flooded store shelves with decks in February 1997, followed a month later by the first software titles from – who else? – Warner Home Video. Sony-owned Columbia TriStar followed its it own slate of titles a few months later.

But what if you gave a format and nobody came?

Where Are The Titles?

It had been nearly five years since Warren Lieberfarb started lobbying for the DVD format. He’d spent a good deal of those five years cornering other studio executives, and convincing them to get on the DVD bandwagon when the time came.

Well, the time had come, the DVD bandwagon had pulled up, and – no one got on.

True, the Hollywood community supported SD, then the unified DVD format. But when DVD players became a reality, the studios froze. First it was fear of piracy until the CPTWG completed its work. Then, it was fear of yet another new format, and the fear of cannibalization of the still healthy videotape business. And on top of these fears, there was jealousy and greed at work. Many studios balked at the idea of paying Warners a few cents a disc in DVD licensing royalties.

Of course Warner and Sony’s Columbia TriStar were on board, along with long-time supporter MGM. But it wasn’t until the fall of 1997 that the next two studios, Universal and Disney signed on. “I did breathe a sigh of relief when I got the news (that Disney would embrace DVD),” Lieberfarb said in a September 1997 interview with Variety. That left Fox and Paramount.

Fox announced its first DVD releases in November, then held back. In mid-August 1998, Paramount titles finally hit retail racks, leaving Fox as the remaining hold-out. It took almost another year for Fox to get its movies onto DVD and into stores.

According to Newsweek, it took some major prodding by Lieberfarb and much backroom wheeling and dealing to get these two recalcitrant studios to release titles. Paramount signed on only after Warner agreed to a favored pricing plan for Blockbuster, owned by Viacom, which owns Paramount. And Rupert Murdoch agreed to release Fox titles on DVD only after Time Warner backed down in a bitter and highly-publicized dispute over airing the Fox News Channel on Time Warner cable systems.

DreamWorks announced its first titles in October 1998. And a week before Christmas 1998, Universal announced that the first movies directed by Steven Spielberg would be available on DVD. It wouldn’t be until spring 1999, however, more than three years after the format unification and more than two years since the copy protection problem had been solved, that DVD decks and DVD titles from all the major studios were available nationally. The most glaring DVD MIAs are the original Star Wars Trilogy, which likely won’t be released until after the third new Star Wars episode is released.

Ironically, the industry’s fear of a new format killing VHS have been realized. Last year, DVD players outsold VCRs, and rental outfits such as Blockbuster are now stocking more DVDs than VHS tapes. But the loss of the VHS business has simply meant new profits from DVD by both hardware vendors and the studios.

Ironically, after losing the format battle to Toshiba, Sony is winning the war. According to NPD Intellect, a market research firm that tracks consumer hardware sales, Sony sells nearly as many DVD players and Toshiba and Matsushita combined.

Sadly, times have changed. Both Bell and Hase now work for Warner Brothers, and IBM no longer has the muscle to force the recordable DVD format combatants to the bargaining table, much less negotiate a compromise. As a result, look for a long and confusing recordable DVD format war, a war that cannot possibly produce any winners. Only we, the consumer, are a sure loser.